New laws to protect against lawyers stealing trust money

Clients who are often defrauded or had their money stolen from their trust funds by attorneys will soon have even stronger and more transparent protection against unscrupulous legal practitioners following the introduction of legislation that will stop culprits in their tracks.

The Legal Practice Act (No 28) of 2014 provides for tighter regulation of transactions or payments of such funds to and by clients, which has been welcomed by the legal fraternity.

“There will be more and tighter accountability by professional legal advisers under the new setup,” says Motlatsi Molefe, CEO of the Attorneys’ Fidelity Fund, which is soon to be renamed the Legal Practitioners’ Fidelity Fund (LPFF).

Molefe, in an interview with The Citizen, expressed jubilation at the changes that will come into effect from November 1 as a result of the passing of the legislation. The Act provides for the dissolution of the four existing law societies, which will be replaced by a centralised Legal Practitioners’ Council that will have provincial councils in all the nine provinces.

The main thrust of the new changes for the fund is to strictly regulate transactions of monies kept in trust accounts in the custody of lawyers to prevent any misappropriation of funds by legal practitioners. Molefe says wrongdoers will be penalised for misconduct after an investigation by both the restructured LPFF and the regulators.

The new law empowers the LPFF to investigate and even conduct private prosecutions against individual lawyers if the National Prosecuting Authority either refuses to or otherwise fails to prosecute. Should the fund wish to, private prosecutions may now be instituted in terms of the new Act but will be restricted to the theft or misappropriation of trust monies by legal practitioners.

The fund’s original objective to settle claims by the public against attorneys involved in the theft of clients’ monies will remain. An attorney will be expected to have a separate trust account for a client’s trust funds and another for the law firm’s regular business. A secondary objective of the fund is to provide professional indemnity cover to all attorneys in the country against negligence and other conduct emanating from their practice of law, other than theft.

Molefe says: “For the first time we will also be able to focus on public protection more fully with the necessary powers to ameliorate theft. In a situation where there was a valid transaction involving a client and a practitioner but the money was stolen or misappropriated, we have always compensated the claimant as the fund. With the new changes, we want to ensure that a client does not suffer or get prejudiced because of misappropriation by a lawyer.”

The new legislation will give the LPFF the power to investigate a legal practitioner suspected of misconduct as referred to the fund by a client, but only in relation to trust monies.

“If an attorney is found to be responsible for negligence, on the other hand, the Attorneys’ Insurance Indemnity Fund continues to exist in terms of the new Act as such and we will continue to compensate clients in terms of this scheme where claims are valid. We believe no member of the public should be left out of pocket due to theft or negligence by an attorney,” Molefe says.

The legislation gives the fund powers to inspect the books of an attorney to ensure accounting compliance.

“We can dispatch an investigator from our office to an attorney to see if the attorney is compliant. We are allowed as the LPFF to appoint a curator in the case of a complaint regarding money meant to be deposited into a trust account but was unaccounted for. If stolen, we will investigate that,” Molefe says.

The current structure of the outgoing board comprises a 16-member board responsible for policy and strategy drawn from representatives of the four provincial law societies who each have four representatives on the board. The executive management is led by Molefe as CEO and is responsible for the day-to-day operations of the fund. But the new LPFF board will consist of nine members made up of four attorneys, one advocate with a fidelity fund certificate, two auditors nominated by the Independent Regulatory Board for Auditors and designated by the Legal Practice Council, as well as two “fit and proper persons” designated by the minister of justice.

“The name will change but the objectives will remain the same. People will be referred to as legal  practitioners instead of catering for attorneys only. The fund will also cater for advocates with a fidelity fund certificate, hence the names Legal Practitioners’ Fidelity Fund and the Legal Practice Council. But on the ground, attorneys will remain as attorneys,” Molefe adds.

Attorneys have to obtain a fidelity fund certificate, which is a condition for them to receive fees for work done.

“An attorney who does not have a fidelity fund certificate will not be able to receive fees. The new Act introduces a new practice in that it also allows certain advocates to receive fees directly from the public because they will have fidelity fund certificates. But such an advocate would be subject to the same rules of inspection and compliance as any other attorney and his practice would be subject to rules governing a trust account.”

Molefe says anyone with a financial complaint against an attorney or advocate under the new dispensation can approach the LPFF or LPC to lay their complaint but the LPFF will only deal with finance issues, not the legal practice conduct of the practitioner, which is the jurisdiction of the LPC.

ericn@citizen.co.za

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